Price Floors And Ceilings Prices

But this is a control or limit on how low a price can be charged for any commodity.

Price floors and ceilings prices. Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services. Price controls can be price ceilings or price floors. Like price ceiling price floor is also a measure of price control imposed by the government. Although both a price ceiling and a price floor can be imposed the government usually only selects either a ceiling or a floor for particular goods or services.

A price ceiling keeps a price from rising above a certain level the ceiling while a price floor keeps a price from falling below a certain level the floor. Issues a price that is lower than the equilibrium. Price floors and ceilings are inherently inefficient and lead to sub optimal consumer and producer surpluses but are nonetheless necessary for certain situations. However prolonged application of a price ceiling can lead to black marketing and unrest in the supply side.

This section uses the demand and supply framework to analyze price ceilings. Government imposes a price ceiling to control the maximum prices that can be charged by suppliers for the commodity this is done to make commodities affordable to the general public. It is legal minimum price set by the government on particular goods and services in order to prevent producers from being paid very less price. The next section discusses price floors.

A price ceiling is the legal maximum price for a good or service while a price floor is the legal minimum price. What is price floor.